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    Published on: January 30, 2017

    by Kevin Coupe

    SCOTTSDALE, Arizona -- I've always felt that if I walk away from a conference or meeting with questions that have not been answered, that's probably a good thing. It strikes me that a good conference or meeting makes the attendees think; sure, they can provide some answers to some questions, but mostly they should exist to provoke questioning and fresh thinking on the part of the people who attend.

    By that measure the 2017 Food Marketing Institute (FMI) Midwinter Executive Conference here has been successful ... because it has left me with questions about three different subjects.

    To begin with, let's talk about e-commerce. There were several sessions over the weekend that focused on the digital realm, and how the supermarket industry is being affected by a technological evolution that seems to be accelerating. In one general session, Thom Blischok, chairman/ CEO of The Dialogic Group, unveiled some research from The Nielsen Co. projecting that by 2025, the share of online grocery spending could reach 20%, representing $100 billion in annual consumer sales. That's total store ... and it is the equivalent of the volume done by thousands of bricks and mortar stores.

    There also was research suggesting that during that same time frame, the industry should expect that four out of ten dollars spent in center store will then will "migrate to an online shopping experience."

    Those are big numbers. Hell, even if Nielsen is only half right, the numbers are considerable, and the impact on the retail food industry will be enormous.

    Which led me to ask Blischok a question after the session: "Of all the companies in the room and attending the conference, how many do you think are ready for this shift?"

    Blischok's answer: "Right now? Zero."

    Now, that's not to say that they can't get ready, but he emphasized that to do so, they are going to have to rethink operational, logistics and profitability issues to a degree that is going to take them out of their comfort zone ... and that's not a place where a lot of retailers like to be.

    I asked Blischok if the suggestions being made for embracing the challenge of e-grocery were any different than would have been made a year ago, or two years ago, or three years ago. He said they weren't ... only the research that points to exactly how big the e-grocery market is likely to get is different.

    He also agree that we may all find ourselves back again next year, and the year after that, and the year after that, talking about these same issues in the same way. The only difference will be that the clock is ticking, and the window within which traditional companies can deal with these threats is slowly closing.

    There was another breakout session on e-commerce at which two of the panelists agree that a) we are still early in the development of e-grocery and b) the pace is picking up.

    Rich Tarrant, CEO of MyWebGrocer, made the point that "we're still in the second or third inning" of e-grocery development, but that things are changing fast as a lot of "intersecting models" compete to see what will work best and be sustainable. (Full disclosure: MyWebGrocer is a longtime and valued MNB sponsor.) And then David Mounts, CEO of Inmar, argued that while we still are early in the process, momentum and acceleration mean that we're actually "halfway there."

    Which leads me to another question: What exactly does there mean? I'm not sure anyone knows, but I suspect that the winners will be the ones who have a vision, but also are nimble enough to understand that "there" may mean something different when you're in the fourth inning than it does when you're in the seventh.

    But I absolutely believe that leaders and companies at least have to have some sort of strategic sense of where "there" is for them, and have to be completely committed to moving organizations in that direction,

    The second subject about which I had questions was crisis management, the subject of another general session over the weekend.

    For the most part, the conversation was about the importance of developing communications strategies designed to deal with the complexities of consumer interaction in a social media world, using examples like the debates over GMOs and cage-free eggs to stress the importance of transparency and trust.

    All of which made perfect sense to me. Except ... I could not figure out for the life of me why nobody really was talking about the food safety issue, and how to deal with the changed regulatory climate and heightened legal demands that put new pressures on retailers and suppliers.

    (More full disclosure. ReposiTrak, which is in the business of providing brand protection through a platform that offers food safety-related data tracking and collection, is another longtime and valued MNB sponsor. What can I say? I have cool sponsors working in areas critical to the business. And, because I've produced a bunch of videos for ReposiTrak on the subject of food safety, I've learned more than I ordinarily might know about the issue ... which had my antennae up when they were talking about crisis management.)

    One of the things I've learned over the years about many retailers and suppliers is that they simply are not prepared to deal with a major food safety problem. Either they don't have complete records, don't have sufficient insurance, and don't have a comprehensive plan for how to deal with such a problem. I've talked to retailers who believe that just because they've never had a problem, they probably never will, or who lately have been less worried than in the past because we're currently living in a political climate that favors deregulation; they're convinced that the Food Safety Modernization Act (FSMA) will be essentially neutered, and so they don't or won't have a problem.

    To me, this suggests a disregard for a simple reality - if a major food safety crisis affects one company, it will create mistrust, potentially, for all food companies ... and the drivers of this mistrust will be consumers, not regulators. And so, it was a subject that I thought should've been covered.

    Finally, the third subject about which I have questions ... it is tangentially related to crisis management, but actually much bigger, and ought to be a number one agenda item for every company.

    Here's the question: What do we do tomorrow if President Trump mentions our company in a Tweet?

    Let me be clear. This is a business question, not a political question. It doesn't matter how you feel about the Trump administration and its policies. But there are certain realities.

    A fictional scenario: Tomorrow morning, President Trump wakes up and Tweets:

    Just read that Kroger is hiring 10,000 new employees in US. Winner! Everybody should shop at Kroger.

    Three things then happen. Roughly 40 percent of the country is going to respond to that by saying, "I love Trump, good for Kroger, I'm going to shop at one of their stores."

    Another 40 percent is going to say, "I hate Trump, and I'm never going to walk in a Kroger ever again."

    And then Kroger's stock price drops, and the company finds itself in the middle of a political debate it did not want and cannot win, dealing with disenfranchised customers it did not want to alienate. Maybe it'll all be a wash between the ones who are happy with Kroger and those who are not ... but I cannot imagine that this would want to be a risk that the company would want to take.

    By the way, the other 20 percent of people understand nuance enough to know that regardless of how they feel about Trump, hiring 10,000 employees is a good thing, and a random Tweet should not affect how they feel about the company. But we don't live in a world these days where nuance travels very far. Rather, our world is so polarized on both ends of the political spectrum that businesses and their people could well be hurt, and not because of anything they did or risks they took.

    (This is different, by the way, from when companies decide to choose sides, whether their reasons are good or not. There's a lot of that going on these days, and when companies decide to stake out political positions in this environment, it has to be with the knowledge that they could be putting their businesses at risk.)

    And so, this was a question I thought should've been asked. But wasn't. (Just for the hell of it, I test drove this question a bit with executives at the conference, and the majority of the ones I talked to said that a) it was a good question, and b) it was not a question their companies were asking themselves. (Only one company to which I talked - a supplier - said that they'd had an internal meeting on the subject.)

    This is all a matter of risk, and of good business, and of being ready for anything in a sometimes toxic political environment that seems to envelop businesses, for better and/or for worse, with regularity.

    (Speaking of being ready for anything ... it is worth noting that next year's FMI Midwinter Executive Conference is scheduled to be held at a Trump-owned property in Miami, which could be awkward if the administration has taken actions that have been unkind to the food industry. On the other hand, it could be cause for celebration. I hope it is the latter.)

    Three subjects, lots of questions. Still looking for answers, right here, every day.

    (By the way, we'll have more from the FMI Midwinter Executive Conference below...)
    KC's View:

    Published on: January 30, 2017

    by Kevin Coupe

    Good piece by the New York Times about a new franchise business called Velofix, which has more than 80 franchises in Canada and the United States.

    Velofix has an intriguing business proposition - it is a mobile bike shop. If you have a bicycle that needs repair, you don't have to lug it down to the local bike shop and leave it. Instead, Velofix comes to you.

    "It isn’t the only company taking this approach," the Times writes. "Beeline Bikes in California also offers mobile bike-repair franchises."

    And here's where this story of disruption starts to sound familiar:

    "This is just one of several changes coming to an industry that has resisted many of the innovations that have altered others over the last 15 years. Some smaller bike companies have sold their bikes online for some time, but now the industry’s largest manufacturers are offering bikes directly to consumers via their web pages.

    "All of this presents the possibility of better service and perhaps even lower prices for consumers. But it has also raised concerns for the future of the neighborhood bike shop. The bicycle industry has hardly been a bastion of health. Since 2000, about 40 percent of bike shops have closed or have been consolidated by larger chains. Bike sales have remained essentially flat over the same time ... Many bike shops are already reacting to these changes. Richardson Bike Mart, a three-store chain in the Dallas area, started its own mobile repair service. Though many shop owners worry that such a service could cannibalize their business, that has not been the case, said the store’s owner, Woody Smith. So far, 65 percent of his mobile repair customers are new."

    You can read the entire piece here.

    The thing is, these are the kinds of disruptions that affect every business. It is called progress. It isn't objectively good or bad, even if it forces some companies out of business, because it also forces other companies to deal with the stark reality of increased consumer expectations. They can either meet or exceed them, or they can settle back into irrelevance and eventual obsolescence.

    Their choice. Your choice.

    It is an Eye-Opener.
    KC's View:

    Published on: January 30, 2017

    The Miami Herald reports that a Walmart Supercenter in Orlando is getting a new feature - an organic restaurant called Grown.

    According to the story, this is Grown's second Central Florida location: "The original 69-seat restaurant draws long lines and constant drive through traffic for being the first of its kind to offer certified organic, gluten-free and locally sourced cuisine in a quick service restaurant. It’s fast food for people who hate fast food."

    Grown was founded by former NBA and Miami Heat star Ray Allen and his wife Shannon, who came up with the idea after they "struggled to find nutritious, quick food" for one of their sons, who had been diagnosed with Type 1 diabetes.

    The Allens said that "opening inside a busy Walmart, full of families, was a natural fit," and noted that "Walmart is quietly the second-largest seller of organic groceries in the United States. The restaurant, opening in mid-February, will serve breakfast, lunch and dinner daily from 9 a.m. to 9 p.m."

    “Operating Grown inside of Walmart makes us accessible to every family, regardless of their mean income," Shannon Walker said. "This is a game changer.”
    KC's View:
    The question is, does Walmart think of this as a one-off? Or, if it plays well, does Walmart see this as a concept that could have legs and help it differentiate itself around the country.

    I have no clue. But it isn't hard to imagine that if this works, Walmart tries it again. And again. And again.

    Published on: January 30, 2017

    Reuters reports that Tesco has agreed to spend the equivalent of $4.5 billion to acquire Booker Group, a cash-and-carry wholesaler that supplies hundreds of thousands stores, pubs and restaurants in the UK, as well as owns three c-store banners. The deal is said to give Tesco greater "exposure to the fast growing catering sector."

    According to the story, "The planned cash and shares takeover shows the supermarket chain's renewed confidence after two years of gradual recovery under Chief Executive Dave Lewis after an accounting scandal ... Friday's move marked a dramatic change of gear and signals even more focus on its British business where it has a 28 percent share of the grocery market."

    ""It's the next evolution of our strategy...We think it's the right time," Lewis said, adding that "the deal was compelling in its own right and not a reaction to a tougher competitive environment. He said the two companies had been talking for more than a year."

    The proposed deal is expected to face "close regulatory scrutiny, particularly because of its impact on customers at smaller convenience stores and food industry suppliers."
    KC's View:
    I guess Tesco is feeling its oats again.

    Published on: January 30, 2017

    CNBC reports that Starbucks Chairman Howard Schultz has pledged to hire 10,000 refugees over the next five years, beginning in the US with hiring efforts focused "on people who served with U.S. troops as interpreters and support personnel."

    The announcement came, the story notes, "in the wake of President Donald Trump's executive order" that bars or delays "immigrants from seven predominately Muslim countries," and calls for greater vetting and preferential treatment of Christian refugees. The order has been criticized by a number of attorneys general who have labeled it as unconstitutional, and set off a number of protests around the country.

    ""We will neither stand by, nor stand silent, as the uncertainty around the new administration's actions grows with each passing day," Schultz said on Sunday. "There are more than 65 million citizens of the world recognized as refugees by the United Nations, and we are developing plans to hire 10,000 of them over five years in the 75 countries around the world where Starbucks does business."

    In his message of current Starbucks employees, Schultz also took issue with other Trump actions.

    ""If the recent executive order related to health care remains in place and the Affordable Care Act is repealed causing you to lose your healthcare coverage, you will always have the ability to return and can do so within 30 days of losing that coverage rather than having to wait for an open enrollment period," Schultz said.

    And, regarding current tensions with the Mexican government that could lead to import tariffs, Schultz wrote, ""We will continue to invest in this critically important market ... We stand ready to help and support our Mexican customers, partners and their families as they navigate what impact proposed trade sanctions, immigration restrictions and taxes might have on their business and their trust of Americans."
    KC's View:
    This would be an example of what I described above as a company choosing sides.

    Howard Schultz is making a calculated decision that the majority of his customers will respond positively to this approach, though to be sure, there will be people who will find this level and shape of political activism to be offensive and will pledge to get their lattes elsewhere in the future. Which strikes me as a perfectly legitimate response if you disagree with Schultz's politics.

    This is entirely in character for Schultz and Starbucks. This mindset is as much a part of the company's progressive DNA as the coffee beans it sells. But it would be a mistake, I think, not to acknowledge that this is a gamble and what is the more sustainable political mindset.

    Published on: January 30, 2017

    The Food Marketing Institute has recognized Ed Crenshaw, the former Publix CEO and current chairman of the board with the organization's highest honor, the Rabb Award, citing him for "excellence in serving the consumer, the community and the industry."

    At the same time, FMI honored Joe Colalillo, president of ShopRite of Hunterdon County, Inc. and chairman and CEO of Wakefern Food Corp., with FMI’s Wegman Award for "exercising entrepreneurial leadership in the design of retail strategies and imaginative merchandising."

    And, FMI also recognized two executives with The Hershey Company - J.P. Bilbrey, president, CEO and chairman of the board, and Tom Joyce, retired vice president, global customer and industry affairs - with the William H. Albers Award, citing them for "excellence in trading partner relations and consumer and community service."

    FMI also presented a series of Gold Plate Awards, recognizing retailers who were best-in-class at "encouraging shoppers to share more family meals together around the table ... by implementing innovative in-store and media campaigns."

    Among the recipients, in a variety of categories: Skogen’s Festival Foods,K-VA-T Food Stores, Hy-Vee, Inc., Merchants Distributors Inc., Campbell Soup, and e-grocery provider Rosie Applications.

    The awards were all handed out at the 2017 FMI Midwinter Executive Conference in Scottsdale, Arizona.
    KC's View:

    Published on: January 30, 2017

    The Tampa Bay Business Journal reports that Publix "is making progress on its expansion into Virginia," and has "pulled permits to renovate four of the Martin's Food Markets Inc. stores it is buying in the Richmond area." Publix is said to have earmarked $16 million to renovate the stores.

    The story notes that "in early 2016, Publix announced it would start building stores in Virginia, its first new state in four years. The expansion was accelerated in July, when Publix was able to pick up 10 Martin's stores in the Richmond area as the result of a merger between Ahold USA Inc. and Delhaize Group."

    Virginia is becoming a hotbed of supermarket competition, with Wegmans also having opened two stores there last year, and German discounter Lidl making plans to open there sometime next year. "Trader Joe's and Aldi have a presence there as well," the Journal writes. "And Publix's biggest competitors — Kroger Co. and Walmart Stores Inc. — both have stores in the area."
    KC's View:

    Published on: January 30, 2017

    Business Insider reports that "Sears is laying off Kmart workers in an apparent move to cut costs as the company struggles to stay afloat.  The layoffs, executed last week, targeted full-time workers, including assistant managers and department heads - or 'leads' as Kmart calls them - across the country."

    Sears would only confirm that layoffs would take place, but now how many or where.

    However, Business Insider quotes insiders as saying that "the cuts affected most of Kmart's 800 stores. Among the positions cut were assistant store managers, front-end leads (managers in charge of the customer-facing part of the store), backroom leads (managers in charge of unloading and organizing merchandise in the stock room), and pricing leads (managers in charge of pricing and store signage)."
    KC's View:
    Hate to say it because there are still a lot of people depending on Sears/Kmart for a paycheck, but there's a point where they just have to put this dying animal out of its misery

    Published on: January 30, 2017

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    Reuters reports that "shares of U.S. supermarket operators fell on Friday as President Donald Trump kept up his criticism of Mexico, which is a major supplier of produce and other foods for U.S. consumers. A day after the White House suggested that the United States could impose a 20 percent tax on goods from Mexico, shares of Wal-Mart Stores and Kroger Co. fell more than 1 percent, while Whole Foods Market dropped 2.8 percent."

    To be fair, though, the Dow Jones Industrial Average also closed the week still above 20,000, a level never before achieved and attributed to many by general business optimism about how the nation's economy will fare in a deregulatory climate.

    New Brunswick Today in New Jersey is reporting that Key Food plans to rebrand all of its stores in the Garden State, changing them from "Key Food Marketplace" to "SuperFresh," adopting a banner that it bought from A&P early last year.

    The story notes that "In 2015, Key Food purchased 23 stores from bankrupt A&P reportedly saving some 1,800 jobs in NY and NJ, where A&P’s, Food Basics, and Food Emporium’s, Pathmark’s, and Waldbaum’s stores were located."

    Maybe this is a bit of an overreaction and probably the Key Foods folks know more than I do ... but just on principle and a yearning for decent karma, I think I'd stay as far away from anything remotely connected to A&P as I possible could.

    • The Wall Street Journal reports that "H. Fisk Johnson, the chairman and chief executive of SC Johnson in Racine, Wis., is giving $150 million to the Cornell College of Business, which will be renamed the Cornell SC Johnson College of Business. Mr. Johnson said he expects the gift will be half from him and half from his company."

    The donation is said to be the largest single gift to Cornell’s Ithaca campus, according to the university. And, "the donation includes a matching portion; the Johnson family will provide an extra $25 for every $75 raised by others, up to $50 million. If completely realized, Cornell would raise $300 million."

    Sort of puts the couple of hundred bucks I gave last year to my school, Loyola Marymount University, into stark relief. Yikes.
    KC's View:

    Published on: January 30, 2017

    ...will return.
    KC's View:

    Published on: January 30, 2017

    It was deja vu all over again at the Australian Open, as 35-year-old Roger Federer defeated longtime rivalRafael Nadal in five sets (6-4, 3-6, 6-1, 3-6, 6-3) to win the Australian Open Men's Singles Championship for the fifth time, becoming the oldest man to win a Grand Slam singles title in 45 years.

    And in the Women's Singles Championship, Serena Williams defeated her sister, Venus Williams 6-2, 6-2, to earn her 23rd major singles title. At 36 years old, she is the oldest woman to win a Grand Slam singles title in the Open era.
    KC's View: